The cash and stock transaction values Reuters at $17.2 billion.
Holders of each Reuters share will be paid $6.99 in cash and 0.16 Thomson-Reuters PLC shares.
The value of the deal is calculated based on Thomson's closing share price of 48.46 Canadian dollars on the Toronto Stock Exchange on May 3, the day before the companies announced they were exploring a combination.
Thomson, formally based in Toronto but with its operational head office in Stamford, Conn., would control about 70 percent of the shares in the new company, Thomson-Reuters PLC. The combine will be headed by Tom Glocer, 47, who is now chief executive of Reuters.
The two companies expect to realize $500 million in savings by the third year.
Regulatory approval is expected to take longer than usual, because of the small number of companies competing in the financial data field.
Reuters trustees, who could have vetoed any takeover, endorsed the deal.
"We believe that the formation of Thomson-Reuters marks a watershed in the global information business, and will underpin the strength, integrity and sustainability of Reuters as a global leader in news and financial information for many years to come," said Pehr Gyllenhammar, chairman of the trustees.
Reuters competes with Thomson and Bloomberg LP in providing terminals with news and financial data on stocks, currencies and bonds to banks, traders and stock brokers. Reuters was the market leader for years before steadily losing ground to Bloomberg.
The Wall Street Journal reports that some of the three services' biggest customers may support the Reuters-Thomson merger, because of unhappiness with several price increases by Bloomberg in the past few years.
An April report from Inside Market Data Reference said Bloomberg has a 33 percent share of the market, with Reuters holding 23 percent and Thomson 11 percent.
This deal knocks Bloomberg into second place, reports CBS News correspondent Larry Miller.
"For Thomson, it is a defining moment in our journey to become the information provider of choice for the world's business and professional markets," said Richard J. Harrington, Thomson's president and chief executive. Harrington, 60, will step down when the merger is completed.
London-based Reuters was born in 1851 when Paul Julius Reuter started sending stock market quotations between London and Paris via the new Calais-Dover cable.
Reuters shares were up 2.8 percent at $12.34 on the London Stock Exchange.
The merged companies will have a dual-listed structure.
Thomson will retain current listings on the Toronto Stock Exchange and on the New York Stock Exchange.
Thomson-Reuters PLC will apply for its ordinary shares to be listed on the London Stock Exchange and intends to apply for its American Depositary Shares to be listed on Nasdaq.
"The companies will be separate legal entities but will be managed and operated as if they were a single economic enterprise," the announcement said. "The boards of the two companies will be identical and the combined business will be managed by a single senior executive management team."
The combined Thomson Financial unit and Reuters financial and media businesses will be called Reuters.
Thomson's professional businesses — legal, tax and accounting, scientific and healthcare — will be branded as Thomson-Reuters Professional.
Woodbridge, the Thomson family holding company which controls roughly 70 percent of Thomson, will own approximately 53 percent of the combined business. Other Thomson shareholders will have 23 percent and Reuters shareholders 24 percent, the companies said.